The sustainability of the ‘rosy picture’ in the first Baltic IPO seen in a long time raises doubts

Insights on Liven’s public share offering (IPO) were shared with Verslo žinios by Vitalij Šostak, co-founder of PLY Analytics.

The financial analysis professional draws attention to the cyclical nature of the business, as well as the tendency of real estate development companies to enter the Baltic stock exchange when the cycle phase is surprisingly favorable: Arco Vara in 2007, Merko Ehitus in 2008 and Hepsor in 2021. “At the time, IPO valuations were also interesting. There is probably no need to remind anyone what happened to share prices after those IPO. Perhaps the situation will be completely different in the case of Liven. But it is still worth remembering the cyclicality and examining it a bit more closely,” warns V. Šostak.

“The profitability metrics that Liven proudly highlights certainly stand out. Very few companies can boast a 28% ROE. Of course, this is partly the result of high financial leverage – the equity ratio before the IPO stands at only 26%, which in turn is one of the reasons why the IPO is being organized. Of course, the company looks at the future somewhat more realistically and declares a long-term ROE target of 20%,” states V. Šostak.

According to V. Šostak, Liven’s net profitability is nearly twice as high as the long-term sector averages among companies that publicly disclose their indicators. However, he notes that investors will have to decide how realistic and sustainable this is in the long term.

Read more in the Verslo žinios article: Seniai matytame Baltijos IPO „rožinių spalvų“ tvarumas kelia abejonių.